Figure 4.1
A consumer's original utility maximizing market basket of goods is shown in Figure 4.1 as point A. Following a price change, the consumer's utility maximizing market basket changes is at point B.
-Refer to Figure 4.1. The income effect of the price change in food on the quantity of food purchased is:

Question

Quizplus · Accepted Answer

The income effect is the change in consumption resulting from a change in real income, which is represented by the movement from F2 to F1 after the price change.

Figure 4.1 A Consumer's Original Utility Maximizing Market Basket of Goods Is